Wine Shortages Coming? Look to Canada

Now would be a good time to pick up that special bottle of French Bordeaux wine that you had on your list – and a couple of extra for the wine cellar. Morgan Stanley Research has just released a report that projects a global shortage in wine production.

According to the researchers, increased consumption in both the U.S. and China are partly to blame for the shortage. China, the world’s fifth highest import market in the world, has doubled its consumption twice in the last five years, leading not only to a greater demand for imports, but an increase in its domestic production of wines.

The U.S., which has always had a robust demand for imported and domestic wines, also played a role in the downturn. The U.S. accounts for more than 10 percent of global wine sales, the majority of which is imported.

Grape production is down as well, particularly in France, Spain and Italy, the world’s three top producers. Shrinking rural land mass and climate change issues have both played a factor in Western Europe’s decreased wine production.

In March of this year, the International Organisation of Vine and Wine, which reports on the health of the global wine industry, noted that global wine production has been decreasing since 2000, in part due to the slip in European production. But some areas are still holding strong, or at least don’t show the substantial decline that is being measured in France.

Chile’s 2012 production was up by more than 80 percent since 2000, as was Australia (57 percent) and South Africa (44 percent). China’s production was up by 42 percent, likely owing to the fact that it has increased its surface production in the last few years.

The U.S. had a modest drop (-5 percent) in wine production in 2012 (measured against its 2000 production), followed by Argentina (-6 percent), which actually increased its surface area by 10 percent.

But U.S. and Canadian wine lovers shouldn’t lose hope. The OIV’s October 2013 report on major wine producers also had a bright spot. As of 2013, it announced, “with 281 Mhl (Millions of Hectoliters) of wine produced, the vitivinicultural world has returned to 2006.” The world’s production in 2012, in comparison, was 252 Mhl.

This year, wine production was stepped up in Chile, Romania and New Zealand. The U.S. also developed some new wine producers, which has helped boost projections for the next few years. The U.S. however, is still wrestling with decreasing surface area for grape production, a problem that has also manifested in Spain, which has the largest concentration of surface area dedicated to wine production in the E.U.

If all of this roller-coaster projection is too much to take, there is some consolation: the OIV’s report (on which the Morgan Stanley report was based) only considers major players in the wine industry. It doesn’t take into account smaller markets like Canada, for example, which has a robust, but small industry in several parts of the country.

Manfred Freese, president of the British Columbia Grape Growers, acknowledged that while Canadian wine producers are known around the world (particularly in the tourism industry), they don’t figure into the OIV’s statistics – at this point in time.

“Our market is relatively modest,” says Freese, who owns Sun Ridge Vineyard in British Columbia’s Osoyoos area, in BC’s largest wine producing region. While the province produces less than 1 percent of what is produced in California, its five regions garner their own following of U.S. visitors who help to keep its tourism strong.

But can BC, or Canada for that matter, fill in to offset Europe’s declining wine production?

Likely not at this time, says Freese. “We are a relatively small industry, very new and developing, and producing some excellent wines,” but not yet ready to absorb the exports that it would take to offset, say, Spain’s dwindling acreage.

So for now, those who may feel down in their cups with an impending wine shortage can always consider a trip to Canada, where, Freese, notes, BC’s wine industry is “in a slight surplus.” North American Free Trade Agreement rules now make it even easier to import wine over the border.

And who knows, maybe with a little extra attention given to our northern wine-producing neighbors, Canada’s wine industry will grow.

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What sources,of research exists for production (Mhl)? What percentage of global production does small (define) land mass growers,represent? Are land values increasing and creating development / zoning alternatives that are attractive to growers?

Are certain countries more likely to sell / change / or otherwise alter their business model and not return as producers? Thereby removing the potential for future statistical relevance?

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